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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by David Marshall

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Working Papers

August 1997"Peso Problem" Explanations for Term Structure Anomalies
with Geert Bekaert, Robert J. Hodrick: w6147
We examine the empirical evidence on the expectations hypothesis of the term structure of interest rates in the United States, the United Kingdom, and Germany using the Campbell-Shiller (1991) regressions and a vector-autoregressive" methodology. We argue that anomalies in the U.S. term structure, documented by Campbell and Shiller (1991), may be due to a generalized peso problem in which a high-interest rate regime occurred less frequently in the sample of U.S. data than was rationally anticipated. We formalize this idea as a regime-switching model of short-term interest rates estimated with data" from seven countries. Technically, this model extends recent research on regime-switching models with state-dependent transitions to a cross-sectional setting. Use of the small sample distri...

Published: Bekaert, Geert, Robert J. Hodrick and David A. Marshall. "Peso Problem Explanations For Term Structure Anomalies," Journal of Monetary Economics, 2001, v48(2,Oct), 241-270. citation courtesy of

January 1996On Biases in Tests of the Expecations Hypothesis of the Term Structure Of Interest Rates
with Geert Bekaert, Robert J. Hodrick: t0191
We document extreme bias and dispersion in the small sample distributions of five standard regression tests of the expectations hypothesis of the term structure of interest rates. These biases derive from the extreme persistence in short interest rates. We derive approximate analytic expressions for these biases, and we characterize the small-sample distributions of these test statistics under a simple first-order autoregressive data generating process for the short rate. The biases are also present when the short rate is modeled with a more realistic regime-switching process. The differences between the small-sample distributions of test statistics and the asymptotic distributions partially reconcile the different inferences drawn when alternative tests are used to evaluate the expect...

Published: Journal of Financial Economics, Vol.44 (June 1997): 309-348.

January 1994The Implications of First-Order Risk Aversion for Asset Market Risk Premiums
with Geert Bekaert, Robert J. Hodrick: w4624
Existing general equilibrium models based on traditional expected utility preferences have been unable to explain the excess return predictability observed in equity markets, bond markets, and foreign exchange markets. In this paper, we abandon the expected-utility hypothesis in favor of preferences that exhibit first-order risk aversion. We incorporate these preferences into a general equilibrium two-country monetary model, solve the model numerically, and compare the quantitative implications of the model to estimates obtained from U.S. and Japanese data for equity, bond and foreign exchange markets. Although increasing the degree of first-order risk aversion substantially increases excess return predictability, the model remains incapable of generating excess return predictability suf...

Published: Journal of Monetary Economics, Vol. 40 (September 1997): 3-39. citation courtesy of

March 1987The Permanent Income Hypothesis Revisited
with Lawrence J. Christiano, Martin Eichenbaum: w2209
This paper investigates whether there are simple versions of the permanent income hypothesis which are consistent with the aggregate U.S. consumption and output data. Our analysis is conducted within the confines of a simple dynamic general equilibrium model of aggregate real output, investment, hours of work and consumption. We study the quantitative importance of two perturbations to the version of our model which predicts that observed consumption follows a random walk: (i) changing the production technology specification which rationalizes the random walk result, and (ii) replacing the assumption that agents' decision intervals coincide with the data sampling interval with the assumption that agents make decisions on a continuous time basis. We find substantially less evidence against ...

Published: Econometrica, Volume 59, Number 2, March 1991, pp. 397-424. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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